Berkshire Hathaway CEO Warren Buffett lambasted Wall Street because it encourages speculative behaviour, effectively making it a “gambling hall”.
Buffett, 91 years old, was very vocal at Saturday’s annual shareholder meeting about one of his favourite targets for criticism: brokerages and investment banks.
Buffett stated that Wall Street makes money in one way or another by grabbing the crumbs from capitalism’s table. They don’t make any money unless people do something, and they get a share of it. Gambling is more lucrative than investing.
Buffett lamented that American corporations have “become poker chips” to market speculation. Buffett cited the rise in call options and stated that brokers make more money than simply investing.
Berkshire Hathaway can still benefit from market disruptions, which could lead to opportunities for the company, he stated. Buffett stated that Berkshire spent $41 billion on stocks during the first quarter. This was after an extended period of lull. A $7Billion of this went to buy shares in Occidental. This increased his share to over 14%.
Buffett stated, “That’s why markets do crazy stuff, and sometimes Berkshire gets the chance to do something.”
“It’s almost a mania of speculation,” Charlie Munger 98, Buffett partner and Berkshire Hathaway vice chair, said.
Munger stated that stockbrokers with even less knowledge than they do about stocks are advising people who don’t know anything. It’s an unbelievable, insane situation. This is something that no wise country would wish for. What would make you want your stock to trade in a casino?
The pandemic saw retail traders flood into the stock exchange, driving share prices up to new heights. Reddit message boards and meme-inspired trading fuelled the frenzy last year. The stock market turned this year, and many new at-home traders are now in the red. The Nasdaq Composite is currently in a bear market. It holds many of the most popular names of small traders and has fallen more than 23% since its April peak.
Warren Buffett is known for his long-standing slandering of investment bankers and their institutions. He claims that they encourage mergers, spinoffs, and extortion to make money and not improve the companies.
He is known to avoid investment bankers in his acquisitions and calls them “money shufflers”. Buffett’s $848.02 per-share offer for Alleghany’s insurer was without Goldman’s advisory fee.
He noted earlier in the session that Berkshire would always have cash and would be more able to extend credit lines to companies in times of crisis than banks. While he was speaking, an audience member made an unintelligible comment.
Buffett laughed, “Was that a banker screaming?”
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